Succession planning can increase the profitability of a business, as well as protect against risks such as the loss of key personnel, yet few Australian businesses have formal plans in place.
The National Manager of Agribusiness Wealth Solutions with the National Australia Bank (NAB), Chris Fry, has told the Australian Meat Industry Council conference on the Gold Coast that succession planning is important for every business.
“A Harvard Business School study has shown that businesses with written and implemented succession plans were 30pc more profitable than their competitors.
“It wasn’t immediate, but the increased profits showed within five years of a succession strategy being implemented,” Mr Fry said.
“Succession planning is an ongoing process, not an event in response to the CEO dying at the desk or a manager leaving to take a higher salary at a competitor.
“It is basic risk management for the success of your business, including business-as-usual operations.”
A Delphi study conducted by Mr Fry over the past three months has determined that the meat processing industry scores itself badly on talent identification and planning, but this is no worse than other equivalent sized businesses.
“There are some good examples of succession planning in Australian agribusiness,” Mr Fry said.
“For instance, the dairy and cotton industries have developed future leaders’ programs involving training for individuals over 12 months, and an expectation that these people will contribute back to the industry by applying their new skills.
“These industries have identified people leadership as an issue as important as improving farm production or marketing.
“By having a whole-of-industry process, employers benefit from a higher level of management skill but there is also greater trust and co-operation across the industry.”
Mr Fry says there are several key points to remember when it comes to succession planning:
• Each business will approach it differently, but it starts with committed leadership
• It is about implementing a formal strategy to cover both the unexpected and the business-as-usual
• Identify people within and outside the business who could fill critical roles in the next 12-36 months
• The intent of the strategy is critical, not the size of the document
Mr Fry believes the next five years will see consolidation within the meat processing industry.
Succession planning will play a role for those businesses that want to leave as well as those who want to stay in the industry.
Agribusinesses have unique needs when it comes to succession planning, which is why NAB has specialised Agribusiness Financial Planners who understand the issues and advise clients accordingly.